1. What has changed?
The Act of 18 December 2015 was published in the Belgian Official Gazette of 24 December 2015, providing the following measures concerning supplementary pensions.
- Measures to guarantee the sustainability and social character of the supplementary pensions:
- The guaranteed return of the employers in the content of supplementary pensions (3,25% on the employer’s contributions for defined contributions pension plans or cash balance pension plans and 3,75% on the employee’s contributions) will be modified to ensure this return becomes once again insurable. Therefore, the guaranteed return will be lowered to 1,75% starting from 1 January 2016. An adaptation mechanism is provided for so the return will be year by year adjusted to the economic reality.
- In case of an exit (for example: in case of the employee termination of the employment agreement before the pension date), the employee will have the option to benefit from a death coverage even when the employee decides to leave the accrued pension reserves in the pension plan.
- Measures to enforce the supplementary character of supplementary pensions compared with legal pensions:
The legislation will be adapted to ensure that, in the future, the supplementary pension can only be taken at the moment the legal pension effectively starts. So-called "advance mechanisms" that may exist in current pension plans will be abolished.
2. What do these changes mean for you?
The measures have an important impact on existing as well as future pension commitments. The next points are significant:
- It is important to verify how to apply the change in the guaranteed return. If the pension plan guarantees a certain result linked to the contributions until the end date, the lowered percentage will only apply to the new contributions. Otherwise, the lowered percentage will also apply to the already built up pension provisions.
- When the employment contract of an employee affiliated to a pension plan is terminated, the employer must inform the employee about the employee’s different options concerning the accrued pension reserves. Now, it must be specified that, if the employee opts to keep the reserves in the pension plan, he may also opt to benefit from a death coverage.
- An employer must verify which consequences will entail linking the supplementary pension and the effective pension date and the nullity of so-called advance mechanisms for the concerned employees. The employees will undoubtedly want to know at what moment they will be able to obtain payment of their supplementary pension and what the financial consequences are. Bearing in mind the complex transition rules, it will be important to assess the situation of every employee.
- All documents concerning the existing pension plans must be analyzed thoroughly and modified if necessary. Some of these modifications must happen immediately (for example: certain references on the pension slips and the option templates in case of an exit) while other pension rules must only be formally adapted at the latest by 31 December 2018. It is not only important to verify what changes must be made but also to make sure what changes are necessary and at which times they must be implemented by, taking into account other planned changes (for example: the implementation of a multi-organizer pension system or the harmonization between blue-collar and white-collar employees).
It is recommended to provide for a correct legal application and implementation of these points. It is also useful to assess certain technical-actuarial aspects with the pension institution and/or the actuary to have a clear view of the possible financial impact of the changes in legislation.
